Alibaba pioneers digital wallet pooling

Chinese e-commerce giant Alibaba has been an innovator in B2B payments, creating its in-house digital wallet Alipay in 2004 for merchants that use its platform. Now, the company’s treasury management team has pioneered a novel cash pooling structure which allows the e-commerce giant to reduce risk and boost cash returns.

Last year, Alipay outstripped PayPal in terms of number of users, and has become a key part of Alibaba’s daily operations. It has been maintaining these digital wallets as bank accounts and has structured the cash pooling strategy around it.

The cash pooling structure, which is part of ‘a target-balancing cross-bank pooling structure’, comes into the picture when the Alipay digital wallet accounts fall below the pre-determined thresholds, at which point they are automatically funded to the targeted levels in real-time from balances with Alibaba’s cash management banks.

In the initial version, there was a 15-minute interval between the checking of an account for balances, which got reduced to a 5-minute interval in the company’s ‘Phase 2’. Since Phase 2 went live in August 2020, the company has been preparing for ‘Phase 3’.

While the company is looking forward to using Alipay in its treasury as the payments system develops more, it has also developed a blockchain solution termed ‘AntChain’.

Read more on the cash pooling structures built by Alibaba in its digital wallet Alipay, revolutionising the digital payments symbiosis with the treasury.